Amendments to the Russian Tax Code

Russia
16/12/2003
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On 8 December 2003, the Russian President signed into law two amendments to Article 174 of Russia's Tax Code, which are designed to hamper capital flight and VAT evasion.

These amendments are addressed to the Russian companies and entrepreneurs which use the services of foreign companies carried out in Russia or purchase goods from foreign companies.

The first amendment makes it incumbent on those using the services of foreign firms to pay value-added tax (VAT) on the payment for such services. The current version of Article 174 provides for the possibility of extending of VAT payment, i.e. paying VAT no later than the 20th day of the month which follows the date of the payment for services.

The second amendment prohibits banks from accepting money transfer orders from a tax agent if the agent neither instructs the bank to make a simultaneous VAT payment nor deposits a sufficient amount to cover its VAT obligations. A tax agent is any Russian company or entrepreneur that buys a commodity or service from a foreign company that is not registered with the Russian tax authorities. The amendments do not, however, specify the liability for the banks which fail to observe the above requirement.

The amendments will come into force as of 1 January 2004.

For further information please contact David Griston at:

[email protected].

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